Yes, I’m gloating a little bit, although I refuse to accept “prophet” status. This is what I said back in July:
How many times have you heard rosy economists–likely after a dose of prozac, lithium, and thorazine–look at the camera and tell us that the worst of the credit crisis is over.
In fact, they are so FOS that they need an industrial enema.
General Motors is bankrupt. It’s not official yet, but the only question is whether it will be by the end of the year. That analysts are discussing GM and bankruptcy in the same sentence, conveys that the situation is dire.
SaudigroupCitigroup has written off at least $40 billion in assets. Ditto for Merrill Lynch.
The American taxpayer has financed JP Morgan’s buyout of Bear Stearns, which was effectively a Chapter 7 liquidation in disguise.
Countrywide was bought out by Bank of America at a fraction of her former capitalization. It remains to be seen of BoA made a wise move.
The Federal Reserve has sunk interest rates, thus foisting a backdoor tax on Americans to bail out those poor souls who were so gullible–in some cases criminally deceptive–to go for Adjustable Rate Mortgages (ARMs). This inflation of the money supply is why we are paying through the nose for gas, food, electricity, and even toilet paper.
Now we have Fannie Mae and Freddie Mac, on the verge of disaster. When the feds are discussing aloud options that are extreme–such as a federal takeover of Fannie and Freddie–then you know the situation is far worse than you are being told. If Fannie and Freddie go belly-up, it will be the Mother of All Bombs. If the feds bail them out, then we will be looking at an economic equivalent of nuclear winter in our lifetimes.
Could Sallie Mae be heading in the same direction?
Now we have both houses of Congress ramrodding a mortgage bailout bill through. Bush will sign it without hesitation. Paulson and Bernanke are all for it.
Our government has panicked, far more so than any administration has in my lifetime.
The question: do you believe a [substitute expletive of choice here] word they say?
Oh, and here is more:
As a former systems engineer for EDS–when it was a subsidiary of General Motors–I am very saddened at the news. I have close friends who are retired from GM and receiving pension benefits. If GM files for bankruptcy, they will be among the casualties of the largest industrial bankruptcy in world history.
While the analysts are still trying to talk positive, they are merely playing the spin game: that they are even discussing the prospect of GM filing for bankruptcy protection means there is a high probability of it happening.
Analysts don’t just use such verbiage without a very strong factual basis. That Merrill Lynch would slash their target stock price for GM by 75%–out of nowhere–is very indicative of a very serious problem.
My prediction: GM will be in bankruptcy court by the end of the calendar year.
Of course, now we have Nancy Pelosi, calling on Bush to bail out the auto industry.